From plas­tic to skin­care, P&G goes for cut­ting edge

It rolls out more tests, small projects on back of crit­i­cism that it is stodgy and bu­reau­cratic

The Straits Times - - BUSINESS -

NEW YORK Proc­ter & Gam­ble (P&G) sur­vived a board show­down with in­vestor Nel­son Peltz ear­lier this week by per­suad­ing share­hold­ers that the com­pany has changed. Now it has to prove it.

Even af­ter declar­ing vic­tory in the proxy fight, P&G faces lin­ger­ing scep­ti­cism that it can in­no­vate and cre­ate a new gen­er­a­tion of block­buster prod­ucts.

To demon­strate that the com­pany has its mojo back, it is bring­ing items to mar­ket more quickly – and it is de­vel­op­ing prod­ucts via smaller and more fre­quent ex­peri- ments. That in­cludes chang­ing its pack­ag­ing. The com­pany cre­ated a new film-based con­tainer for liq­uids that weighs half as much as reg­u­lar plas­tic. It took only about six months to de­velop and is now be­ing tested with Ama­zon.com.

P&G also hired a lin­gerie de­signer to cre­ate a more fem­i­nine-look­ing ver­sion of its Al­ways Dis­creet ab­sorbent un­der­wear with lighter, softer fab­ric.

“It’s quite a shift,” P&G’s chief tech­nol­ogy of­fi­cer Kathy Fish said in an in­ter­view in Cincin­nati.

Rolling out more tests and smaller projects – known as lean in­no­va­tion – is pro­duc­ing re­sults and gen­er­at­ing in­sights that can be ex­tended to other prod­ucts, she said.

That may help counter crit­i­cism that the com­pany is too stodgy and bu­reau­cratic.

When Mr Peltz launched his bid for a board seat in July, he said P&G needed a sim­pler struc­ture and had trailed its peers in per­for­mance in the past decade.

He has slammed the busi­ness for fail­ing to keep up with chang­ing pref­er­ences, say­ing younger shop­pers want smaller brands with com­pelling sto­ries be­hind them.

P&G has ar­gued that sales growth is stronger when it is pinned to es­tab­lished brands that con­sumers recog­nise.

Still, ev­ery­one agrees the com­pany needs to move faster. Tra­di­tional con­sumer-prod­uct mak­ers have not kept pace with the shift­ing tastes of cus­tomers, said Morn­ingstar an­a­lyst Erin Lash. “It takes them way too long to get a prod­uct from con­cept to shelf,” she said.

Ac­quir­ing smaller brands can give more es­tab­lished com­pa­nies new ideas for get­ting prod­ucts to mar­ket more quickly, Ms Lash said.

P&G is not averse to ac­qui­si­tions, but they need to be prof­itable, chief ex­ec­u­tive of­fi­cer David Tay­lor said in a re­cent in­ter­view. At any rate, cus­tomers have re­sponded more in­tently to prod­ucts linked to ex­ist­ing brands, he said.

For in­stance, P&G helped bol­ster its Un­stopables laun­dry scents by adding the Downy brand name. The prod­uct line, in­tro­duced in 2011, now ac­counts for about a half­bil­lion dol­lars in sales each year, Mr Tay­lor said.

Other smaller projects also are pro­duc­ing re­sults. Seed money al­lo­cated to one of P&G’s sci­en­tists led to the cre­ation of a re­cy­cled plas­tic that can be used like new ma­te­rial. Nor­mal re­cy­cled plas­tic has colour and other con­tam­i­nants, so it is only good for lim­ited use, Ms Fish said.

And P&G is test­ing new ways to in­cor­po­rate tech­nol­ogy into prod­ucts. Af­ter re­leas­ing the Oral-B Ge­nius tooth­brush, which tells users how long and where to brush, the com­pany is work­ing on a ver­sion with ad­di­tional ca­pa­bil­i­ties.

In the skin­care cat­e­gory, P&G is us­ing a di­ag­nos­tic on­line tool it cre­ated for its top-tier SK-II line to help it re­vi­talise the mass-mar­ket Olay brand.

Mr Tay­lor said sim­pli­fi­ca­tion of the com­pany’s labyrinthine man­age­ment struc­ture – another area at­tacked by Mr Peltz – is also cut­ting time to mar­ket.

While Mr Peltz rec­om­mended that P&G be bro­ken into three au­ton­o­mous units, Mr Tay­lor be­lieves lo­cal man­agers al­ready have the power they need to re­spond to con­sumer trends.

PHOTO: REUTERS

P&G, which of­fers a di­verse range of prod­ucts, in­clud­ing Tide laun­dry de­ter­gent, faces scep­ti­cism that it can in­no­vate and cre­ate a new gen­er­a­tion of block­buster prod­ucts.

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